The Corner

Bitcoin Is The Napster Of The Payment Industry

For months now, most of the focus about Bitcoin, a new digital currency, has been on the possibility of it could become an alternative currency (a replacement for the dollar, even). However, whether Bitcoin succeeds or fails as a unit of exchange, the innovative technology that it created — a decentralized payment without the need for a middleman — is here to stay. I made that case today in the Washington Examiner:

Most of the recent doomsaying concerns Bitcoin’s use as a traditional currency and is missing the best part of this new tool: Bitcoin as a technology. In fact, Brito, Castillo and Dourado have repeatedly pointed this out in their work.

I’ll leave the complex technical details to them, but the general idea is not so hard to explain. The best way to understand why Bitcoin is such a technological advancement is to compare it to the existing payment system. Let’s say you want to purchase an item online. Normally, the transaction would go through a third-party processor, like Mastercard or Paypal, to verify the exchange and send the money to the seller. These companies earn profits by charging fees and maintaining a current ledger of all transactions to prevent fraud and overspending.

Now comes Bitcoin, and with it, the ability to exchange directly without the need for a middleman. It replaces these third parties with its own programming by applying cryptography to verify and maintain its ledger of transactions.

Bitcoin is not controlled by any one government or company or person: It is maintained by thousands of individuals who choose to run the Bitcoin program on their computers. This program harnesses the computer’s processing power to verify and maintain the ledger of transactions. Every so often, some computers are rewarded with new bitcoins. This is how the supply of bitcoins increases; hence, these computers are commonly called “miners.” Altogether, Bitcoin as a technology allows individuals to transfer payments directly, quickly and cheaply.

While dramatic currency fluctuations capture the popular imagination, Bitcoin’s service as a decentralized payment system is what is truly exciting about it. For instance, small businesses that cannot afford credit card fees view Bitcoin as an affordable payment alternative that they can offer their customers. The potential applications for Bitcoin are almost endless.

The whole thing is here. If you want to read more about Bitcoin, a good place to start is with the work of Jerry Brito, Andrea Castillo, and Eli Dourado.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

Most Popular

Elections

Hell, No

Editor’s Note: If you would like to read more pros and cons on voting for President Trump, further essays on the subject, each from a different perspective, can be found here, here, and here. These articles, and the one below, reflect the views of the individual authors, not of the National Review editorial ... Read More
Elections

Hell, No

Editor’s Note: If you would like to read more pros and cons on voting for President Trump, further essays on the subject, each from a different perspective, can be found here, here, and here. These articles, and the one below, reflect the views of the individual authors, not of the National Review editorial ... Read More
Music

Stevie Nicks, Like Springsteen, Preaches and Preens

In the 1970s, Stevie Nicks and Bruce Springsteen made impressions on pop-music culture with romantic rock landmarks, Fleetwood Mac’s Rumours album and Springsteen’s Born to Run. But their new 2020 releases, Nicks’s single “Show Them the Way” and Springsteen’s Letter to You film and album, make the ... Read More
Music

Stevie Nicks, Like Springsteen, Preaches and Preens

In the 1970s, Stevie Nicks and Bruce Springsteen made impressions on pop-music culture with romantic rock landmarks, Fleetwood Mac’s Rumours album and Springsteen’s Born to Run. But their new 2020 releases, Nicks’s single “Show Them the Way” and Springsteen’s Letter to You film and album, make the ... Read More
Media

‘Anonymous’ Falls Flat

On the menu today: The op-ed page of the New York Times made the deliberate decision to hoodwink America about the identity of “Anonymous”; the sense of guilt that pervades legacy media -- a very apt label; and wondering whether or not we will even see long lines on Election Day with early voting being so ... Read More
Media

‘Anonymous’ Falls Flat

On the menu today: The op-ed page of the New York Times made the deliberate decision to hoodwink America about the identity of “Anonymous”; the sense of guilt that pervades legacy media -- a very apt label; and wondering whether or not we will even see long lines on Election Day with early voting being so ... Read More
Elections

Vote Your Conscience

At the 2016 Republican convention, Senator Ted Cruz spoke a controversial phrase: “vote your conscience.” I think about this phrase, this idea, fairly often. I’m not one to give advice on voting (or much else). But when asked for advice, I usually say, “Vote your conscience.” Sweet conscience! One of ... Read More
Elections

Vote Your Conscience

At the 2016 Republican convention, Senator Ted Cruz spoke a controversial phrase: “vote your conscience.” I think about this phrase, this idea, fairly often. I’m not one to give advice on voting (or much else). But when asked for advice, I usually say, “Vote your conscience.” Sweet conscience! One of ... Read More